Retirement plan advisers have long suspected they can grow their businesses by working with plan participants on an individual basis. Some are modestly, yet unevenly, successful in doing so, particularly when they prioritize the individual business and consider the plan itself secondary.
Yet as RPAs move upmarket, it seems their connectivity with participants and opportunities for additional business decreases. And as more plan-level fees move from an asset-based to flat fee structure, especially in an inflationary environment, those RPAs may even feel as if their revenues are decreasing, on a relative basis.
A change in perspective, a growing demand for customization and an increase in data-gathering tools are expected to reverse that trend. Savvy RPAs will internalize and embrace those changes. In turn, they’ll capitalize in 2022 and beyond.
When I became an RPA, my ERISA attorney background and the DOL’s ongoing fiduciary rule considerations caused me to run from plan sponsors’ questions about our firm’s appetite for “working with participants” or “selling other products.” Truth be told, I’m still a little skittish.
However, the past couple of years have revealed that plan sponsors want RPAs to answer those questions in the affirmative. That’s not because plan sponsors have suddenly decided that they want RPAs to prioritize individual business at the expense of the retirement plan priorities. Instead, it’s because they want their people to have access to help.
The conversation with a participant is not about selling a product. It’s about listening, identifying needs and solving problems. With this change in perspective, RPAs might even realize that the outright refusal to work with participants is a failure on their part.
If an RPA’s goal is to sell a product, I’d advise a plan sponsor to keep that individual away from its participants. If the RPA’s goal is to respond to participants’ cries for education, guidance and help, well, that’s a different story.
The Covid-19 pandemic has further highlighted that participants want services tailored to their specific needs. They did not slip into a “low touch” mindset. They decided they want the touchpoints to be constructed around their preferences for time, place, medium and content.
Simply in relation to the retirement plan, this is a good thing. Participants have opened their eyes, ears and arms to more assistance with their savings rates, pretax or Roth decisions and investment selections.
That higher level of engagement has spawned more interest in other financial needs, including budgeting, student loans, emergency savings, disability insurance, life insurance and other long-term savings needs.
RPAs now have ample access to tools for gathering and analyzing a participant’s data, making it easier to work with them expertly and efficiently. An RPA without access to modern technology for the data gathering process runs the risk of being left behind.
The many adviser managed account offerings provide a starting point for this information. Those AMA solutions collect a fair amount of participant data and highlight needs and potential financial shortcomings. Some aggregators, in fact, are moving forward with the assumption that AMA alone will meet participants’ financial wellness needs.
That approach might reveal a missing link: the participant relationship. Historically, many smaller and midsized RPAs have developed stronger participant relationships. That foundation may better position those RPAs for success when coupling the relationship with the technology. We’re doubtful that an RPA will maximize his or her success without the combination.
Technology and data are key. But they’re not the starting point – they help to connect the dots between the relationships and the eventual solutions. If an RPA embraces the changed perspective described above and sends a clear message of being responsive to participants’ needs, he or she can leverage the data and technology solutions to accomplish that goal. Understanding how these steps fit together will also make RPAs more comfortable with saying, “Yes, we will help your participants.”
Matthew Eickman is the national retirement practice leader at Qualified Plan Advisors.
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